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US tax requirement for UK citizen

US tax requirement for UK citizen

Old Feb 8th 2017, 9:17 am
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Default US tax requirement for UK citizen

Hey, I know a lot of tax questions come up but hopefully this is a quick and specific one.

I have some things to watch out for while waiting for visa to complete. Such as ISAs.

I have cash ISA and a stocks investment for mortgage.

I can easily cash out my cash ISA into regular savings anytime so that should be ok.
The mortgage part, well I'm watching the stock market to find a good time.

I should add, visa is E-2, job is full time US, eta starting some time in March and this is the first time I'll work under visa in the US.

My question really is this. What point would this sort of cash flow such as ISA become (US) taxed. I need to be careful to avoid otherwise that will be a horendusly expensive mistake.

Similarly I want to make a UK personal pension contribution before US tax applies, too.

Does US tax apply from the first day I travel to the US under the visa for work purposes? Is it as simple as that? I'll be considered a US non-immigrant resident I believe at some stage, we'll be there most of the time and for at least a year, maybe indefinitely.

So, I should watch out to conclude my ISA holdings and use my mortgage ISA funds to pay down the house loan before travelling out for work? But if it was anytime up until then while still in the UK it should be fine?

Last edited by LouisB; Feb 8th 2017 at 9:22 am.
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Old Feb 8th 2017, 11:52 am
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Default Re: US tax requirement for UK citizen

You'll be US tax resident from the moment you enter on your visa.
The cash ISA doesn't have any nasty US tax consequences as it's just treated like an interest account. However, any UK registered investment fund will be PFIC and should either be sold before you become US resident or you should be prepared for the US tax implications.
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Old Feb 8th 2017, 1:49 pm
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Default Re: US tax requirement for UK citizen

The personal pension may be a foreign grantor trust.
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Old Feb 8th 2017, 8:31 pm
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Default Re: US tax requirement for UK citizen

Originally Posted by nun
You'll be US tax resident from the moment you enter on your visa.
The cash ISA doesn't have any nasty US tax consequences as it's just treated like an interest account. However, any UK registered investment fund will be PFIC and should either be sold before you become US resident or you should be prepared for the US tax implications.
Thank you. Yes I plan to cash in stocks ISA before US tax applies, so doing it any time before I travel then sounds like it should be safe.
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Old Feb 10th 2017, 7:29 pm
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Default Re: US tax requirement for UK citizen

Actually just one more point regarding tax.
I have a UK private pension (that I should not need for a few decades) but will this be an issue?

A) to pay into as and when I want (while in US under US Tax) Either via my personal income or spare funds in my Ltd company that make company contributions.
B) If I ended up retiring in US - ok probably far too far ahead to think about but anyway, good to know
C) Job provides 401k - I intend to use it, even if in a modest capacity while working in the US

All of this will be OK? I guess I may need to consult a US tax expert at some stage, but good to get a heads-up.
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Old Feb 10th 2017, 7:37 pm
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Default Re: US tax requirement for UK citizen

Your UK private pension will become frozen while you are in the US - you won't be able to contribute to it. It wil still be there when you retire, if you are still in the US, and you will get paid gross and taxed in the US on pension payments.
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Old Feb 10th 2017, 8:29 pm
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Default Re: US tax requirement for UK citizen

Originally Posted by Pulaski
Your UK private pension will become frozen while you are in the US - you won't be able to contribute to it. It wil still be there when you retire, if you are still in the US, and you will get paid gross and taxed in the US on pension payments.
Ok that's fair enough. I'm about to make contributions to my UK one before US rules apply.
Then I'll make use of 401k while in US.

No idea how I'll end up using 401k if back in UK but I think I read you can cash them in with a small tax hit if necessary.

Anyway no idea where I'll end up so building up 401k in addition to UK private pension hopefully can't be bad.
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Old Feb 11th 2017, 8:30 am
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Default Re: US tax requirement for UK citizen

Originally Posted by LouisB
Ok that's fair enough. I'm about to make contributions to my UK one before US rules apply.
Then I'll make use of 401k while in US.

No idea how I'll end up using 401k if back in UK but I think I read you can cash them in with a small tax hit if necessary.

Anyway no idea where I'll end up so building up 401k in addition to UK private pension hopefully can't be bad.
Cashing out a US 401k early usually means you pay tax on the whole amount plus a 10% early withdrawal penalty. However, if your employer is matching part of your contributions then I would definitely still contribute to it up to the employer match.

You will also be eligible to contribute to a Roth IRA which is with after-tax money. On return to the UK if you keep that until you are 59.5 it is all tax free in both countries. (After 5 years you can withdraw the contributions you made tax free and pay tax on the gains + 10% penalty for early withdrawal). Just another complication to think about.
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Old Feb 11th 2017, 9:07 am
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Default Re: US tax requirement for UK citizen

Originally Posted by LouisB
Actually just one more point regarding tax.
I have a UK private pension (that I should not need for a few decades) but will this be an issue?

A) to pay into as and when I want (while in US under US Tax) Either via my personal income or spare funds in my Ltd company that make company contributions.
B) If I ended up retiring in US - ok probably far too far ahead to think about but anyway, good to know
C) Job provides 401k - I intend to use it, even if in a modest capacity while working in the US

All of this will be OK? I guess I may need to consult a US tax expert at some stage, but good to get a heads-up.
The UK private pension may be a foreign grantor trust, the filing deadline for the 3520-A is 15 March, so only a month away.
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